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tv   Your Money  CNN  December 2, 2012 12:00pm-1:00pm PST

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rescue crews are working to free them from the rubble. i'll be back in one hour, so join us at the top of 3:00. we'll be talking about the supreme court. on friday the justices had a chance to tell us if they would weigh in on same sex marriage. find out why they aren't necessarily finished with the issue. plus, we sit down with brad pitt as he takes on the issue of same sex marriage. stay with cnn. "your money" starts right now. the world is finally paying attention to the fiscal cliff, but you've known about the economic storm of our own making for months now. i i'maly velshi. this is "your money." i wasn't waiting to focus on this major threat to the economy. i wish others had. it would have given us more time to fix this major problem. at least now there's a focus on one thing and one dangerous man. a man who is not elected. who has never run pour office and is standing in the way after potential economic disaster.
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he's the ideological godfather of the tea party. grover norquist has been the driving force behind the anti-tax movement. his goal, to take big government and, in his words, drown it in the bathtub. norquist's weapon is the taxpayer protection pledge, which was at one point signed by 95% of gop members of congress. >> can you raise your hand if you feel so strongly about not raising taxes? >> on the campaign trail this year, only one republican presidential candidate, jon huntsman, dared to cross him. norquist has clout. he's called the most powerful unelected man in america today. >> he signed a pledge, it's without congress. >> that pledge is for that congress.
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>> i'm not obligated on the pledge. >> republicans are jumping ship and supporting unspecified r revenue hikes to help cut the deficit. and big business resigned to higher taxes. here is lloyd blankfein. >> we had to lift up the marginal rate. >> norquist's response? >> some of these people have had impure thoughts. no one pulled the trigger and voted for a tax increase. >> to be sure, norquist is still raking in big bucks. according to open, he shelled out almost $14 million to defeat democratic opponents in this past election cycle. >> we've run ads to let people know who has taken the pledge and who hasn't. we'll do phones into letting people know who is taking the pledge. >> norquist's big backers are republican operatives, cross roads gps, the super pac led by kingpin karl rove and the center to protect patient rights. closely tied to the ultra
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conservative cook brothers. they account for a majority of the budget and there's no sign that they're running scared. norquist truly believes that the best way to grow the economy is to tame big government. he told me recently he will be vindicated no matter how many politicians break the pledge. what happens if they break the pledge? you have money behind you. you pile on and try to get them defeated in the next election? >> these are self-enforcing. why? because the american people, the elected people who they want to reform government rather than raise taxes. >> norquist is clearly looking toward the 2014 midterm elections. one high profile figure from the fix the debt movement knows that norquist's clout is clearly waning. >> i don't view this as some -- as the end of grover norquist. i don't think he suddenly disappears. never to be seen of again. but i think his aura of invincibility has largely been shattered. >> so can grover convince his pledge signers to not give in, no deal, no matter what the consequences to the economy?
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jessica yellen is the chief white house correspondent. mark preston is the political director, kevin glass, managing editor at, a conservative political outlet and author of "the loophole in grover norquist's anti-tax pledge." mark, let me start with you. a majority of americans, this is fact, people are tired of me saying it. i'm tired of saying it to people. a majority of americans support raising taxes on the rich. but everybody's taxes go up if congress doesn't get a deal. many republicans are stuck between this pledge they made to norquist and the real threat of taxes going up. and the effects on the economy. how much power does grover norquist wield in this environment? >> he wield power. the invincibility of grover norquist is overblown by us in the media. this tax pledge isn't with grover norquist as it is with taxpayers in the state that
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voted for a lot of these conservatives who signed the pledge. i think it's foolish to think there isn't going to be a deal cut. we don't know what the deal will be. it's foot foolish to think anyone wants the legacy to be they drove us off the fiscal cliff. we're in the political dance now. we've seen this time and time again. there is still three weeks for a deal to be cut. the problem is that the white house threw down a heavy marker yesterday. we'll have to see if they're willing to compromise. it's got to be compromise on both sides. >> that's right. the marker they threw down, kevin, is the white house says actual tax rates, the top tax rate, 35%, has to go up for the rich. and that limiting deductions won't be enough to get a deal. now you wrote in the atlantic this week that despite that there is a way around this for republicans who don't want to incur the wrath of norquist or as mark suggests, voters. how? >> right. so the grover norquist pledge is
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actually incredibly misunderstood. it's based on what washington budgeting organizations call the current law baseline. what that means is that what's scheduled to go into effect already is baked into the cake. and because the bush tax cuts are expiring provisions that were voted for ten years ago, it doesn't really count as a tax hike when they're already scheduled to take effect. so as long as republicans can just keep the revenue below what taxes would raise to in full expiration of the bush tax cuts, they won't be violating the pledge. >> kevin, that sounds incredibly reasonable. do you think grover norquist shares that interpretation? >> so there's an important distinction to be made between what the pledge actually says and what americans for tax reform, his activist organization advocates for. as grover said himself, the pledge is to the american people, not to grover norquist. so it's not just, you know, republicans need grover norquist's approval for what they want to do. it's more that americans for tax reform wants to keep tax rates
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low despite the fact that legislation says they're just going to go up no matter if congress doesn't do anything. >> all right. so compromise is going to require more than finding republicans who are willing to break with the norquist anti-tax pledge. the gop wants to know what the democrats are going to be willing to give up in the form of spending cuts. >> despite the claims that the president supports a balanced approach, that democrats have yet to get serious about real spending cuts. >> jessica, the president ran and won on a promise to raise taxes. i mean what a different scenario. a year ago you and i were talking about how this election was going to be about jobs. both campaigns made exactly the same promise about job creation. so that almost got off the table. it all became about taxes. he doesn't have to run for office again. as you've stated before. could we make the case in order to get a deal the president should just put forward a big proposal to cut the size of
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government that is significant enough to give republicans the cover they need to agree to a deal that would meet that red line that you pointed out that means raising tax rates? is there a win-win for the president here? >> the win-win is -- sure, it's finding the middle ground. the dynamic as you point out has changed, ali. it's clear that washington hasn't accepted the dynamic has changed. it hasn't fully settled in. as you point out, the president ran and won on a promise to raise taxes. the president will not back down from that. republicans on capitol hill are still not accepting at this point that rates will go up. and that is the dividing line at this point. >> that's the problem on the republican side. one of the things i really stick to that you have said in the past, boy, you and i would both love if everybody involved would just tell the truth. now a lot of republicans have said that the white house and the president are not telling the truth that you could only achieve about a trillion dollars over ten years with this increase in tax rates to the top
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2%. that means three-quarters of that $4 trillion goal that president needs has to come from somewhere else and he's not saying where from. >> but they also made it clear -- first of all, they said they're willing to do $400 billion in medicare and other entitlement savings. >> that's true. and they've also said that they're willing to be flexible beyond that. they won't talk about the numbers with us and the press and public. we know they won't negotiate the public. i asked them, will you go beyond -- essentially, will you go beyond that? they said, yes, we're open to negotiating. the bottom line is they indicated that they are willing to do more than that. that they're willing to open up what they were talking about during the debt talks. it comes to changing eligibility ages for some of these entit entitlement programs, raising -- changing the caps -- indexing for inflation, et cetera.
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they'll do it. but they want to start talking numbers with republicans. so, yes, they're willing to do more cuts. but they want the republicans to agree on revenue first. and they're emphatic that republicans aren't willing to talk about the revenue and so they can't start the negotiations. and this all for this week, but these numbers they came out with this week were an effort to try to prod some sort of specific discussion of numbers. >> it's a remarkable game of chicken. i'm quite happy they don't do the negotiations public. it doesn't matter to me, as long as they're going on somewhere. jessica, thank you. our chief white house correspondent. kevin glass and mark preston, 258 lawmakers who will serve in the next congress have signed the norquist pledge. just one of them is a democrat. you'll meet him next and find out if he's sticking to his guns.
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things have been a little strange. (sfx: sound of piano smashing) roadrunner: meep meep. meep meep? (sfx: loud thud sound) awhat strange place. geico®. fifteen minutes could save you fifteen percent or more on car insurance. despite what you may hear in the news, there are members of congress willing to compromise despite having signed the norquist pledge to never raise taxes. i talked to grover norquist many times on this show. i'm going to continue to introduce you to those politicians who have had the courage to question whether a hard and fast rule is really best for the country. here's a running count of law makers who say they are willing to break the pledge that they have signed. we suspect that the empty spaces could fill up over the coming weeks. if you'd like to call your
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congressman and tell them that, that's up to you. but if you thought that norquist conservative anti-tax pledge is for republicans only, i want to introduce you to congressman robert andrews. he's a democrat from new jersey. congressman andrews, thank you for joining us. you are one of a handful of democrats who have signed on to the tax pledge. the only one in the new congress. you do not feel bound by it. in fact, you said you're married to your wife, not grover norquist. >> lucky me. >> lucky you. i agree with you. this is not normally thought of as a pledge for democrats. it's thought of as a republican pledge. why did you sign on to it in the first place? >> in 1992, i signed on to the pledge because i thought a tax increase at that moment in our economy would be wrong. and i honored the pledge. i voted against tax increases. my understanding was it was for that one congress. i never renewed it. i think that flexibility and doing what is right for the country is a heck of a lot more
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important than what mr. norquist wants. >> i'm looking at a copy of the pledge here. it has a lot of detail. it doesn't have an expiration date or reference to how long it is. a number of your colleagues said the same thing. i signed it at a time. i don't think it's forever. the other democrats that signed the pledge were voted out of office or decided not to seek re-election. norquist groups spent upwards of $300,000 to defeat representative ben chandler from kentucky after he went back on the pledge. are you worried about the consequences? >> no. i'm worried about my constituents that are unemployed and struggling to make their businesses succeed or make home values go up. i think if we worried less about washington politics and more about the economy we would do a better job. i'm in favor of something like the simpson-bowles approach being adopted here that has about $3 of spending cuts for every dollar of new revenue, cuts the deficit by $4 trillion and gets the country back on track.
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>> that's where the sticking point is. we think the sticking point is just on republicans who don't want to raise taxes. but they say that it's on democrats who are not willing to cut spending. what republicans want to hear from democrats is what they're prepared to cut, what they're willing to agree to in exchange for the tax cut. three to one. it's an interesting number. do you have some sense though that once you start getting to real cuts all of the low hanging fruit is gone. now everything you cut is going to hurt. >> i agree. i think there have to be some mature decisions. look, i would favor on a fair and equitable basis a slight delay in the age at which people can get medicare. what i favor is if you're under 55 years of age, you have to wait one month for every one year that you're under 55. so a person 50 years old will get their medicare when they're 65 and 5 months old. i wouldn't change it for anybody that is on medicare right now or over 55. look, i would close about
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two-thirds of the military bases overseas in asia and europe. i would scale back -- i would get rid of the ethanol subsidy altogether. i'd scale become on the sugar subsidy and crop subsidies. i think there are things we have to do. i would do those things. >> congressman, pleasure to talk to you. thank you for joining us today to give us a sense of where things should go. >> my pleasure, i'd like to be back. >> robert andrews, democrat from new jersey. coming up, there are cracks in the republican party. it's not just because of the norquist tax pledge. how to repair the gop message next on "your money." yeah. don't say it. so you know what it is, right? yeah, yeah, don't. that's a lot of dough! ♪ [ male announcer ] switch and you could save $480 bucks with state farm.
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a republican party relaunch. a reset. obama is bad for the economy message didn't work and it's not likely to resonate going forward. home prices climbing, household debt down, consumer confidence up, jobs are coming back. breaking from that grover norquist anti-tax pledge is only going to take the gop so far if they can even deal with it. so can republicans find an economic message that resonates
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with voters? to find out, i spoke with stephen moore from the "wall street journal." and a contributing editor at "newsweek" and author of a new book, how did he write this so fast "why romney lost. "looking forward, not backward. the republican dangers, there may be an accelerating economy. you can't simply say obama is bad. you have to have an affirmative message. it has to be economically inclusive. that means, i think, moving away from the myth of the heroic entrepreneur as the main hero and also the main victim of the american economy and understand that the people who have been leading big companies are actually doing pretty well. the harm has been done to the american middle which is experiencing slow growth. what we need to see above all are control of health care costs. that's the key to getting middle incomes rising again. >> stephen, talk to me about this. the fact is we do think the entrepreneur as heroic in the u.s.
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how do you square that circle? >> i think the backbone is the entrepreneur. it's the person who sets out the shingle and employs work eers. i think republicans have to make this connection with workers that, you know, if you hurt the businesses, you are hurting jobs. i don't think they've done a good job of doing that. i certainly agree that health care is a big issue. i kind of agree with david that republicans have kind attacked the obama idea. they haven't been forthright about what they want to do to fix these things. health care is a perfect example. i think republicans have to have a very robust alternative to obama care because that might be rejected in the years ahead. >> the problem is alternatives are lacking. criticism is in abundant supply. so, david, what do we do? where do the ideas come from? where is the well that republican party should be looking at for the new ideas?
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the criticism alone didn't work. >> the republican party has to rebuild their idea generating apparatus. the republican party had a lot of fis ideas, ideas about the budget but not about the american economy. you know what, on health care, for example, obama care is a fact. it is a fact. and it is -- that's what this election decided it is not going to go away. so any republican idea about how maybe there will be a better way to do it or maybe we shouldn't have done this, those ideas are obsolete. >> let me ask you something, you are forever and have been a supporter of no tax increases and you wrote an op-ed about grover norquist. which is very nice for grover because no one else is being all that affectionate about him. i'm not asking about whether taxes should go up. but is the tax pledge, is that kind of behavior standing in the way of reinvention of the republican party? >> i don't think so. i think it's just the opposite.
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the reason that the left and some of your friends in the media have really, you know, ganged up on grover norquist, they have really been extraordinarily hostile in their attacks against him, is that this has really been the fortress of the republican party. that no tax position has been the defining issue for the republicans. i still think by the way it's a winning issue. americans don't like taxes. they do believe that we have to cut spending first. >> let me interrupt. you and i, we talk a lot. at the beginning of this year jobs were far and away the most important economic issue. by the time people went to the ballot boxes, it had come down to taxes. it kind of was a referendum. so how do you figure that's a winning issue for the republicans when it was kind of repudiated? >> because there is two parties. there's a pro tax party and an addict tax party. republicans have to continue to highlight the differentials. you may be right, by the way. americans may think well let's tax the rich. let's do that. what i'm saying is if they do
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that, it should be democrats who do it. republicans should not sign off on a policy that raises tax rates. what i would say and i wonder what david's reaction is to this. republicans have to double down on the growth message. maybe you're right, david, that the economy is improving. i'm not quite as sanguine as you are with obama care and the tax rates going up and also the big burden of the debt. but you know, republicans have to have a growth message. and i just don't think they articulated any kind of alte alternative. david is right. all they talked about was obama's policies aren't working. but if you ask americans today what are republicans for, they don't have a solution. education, by the way, is a good one. i think republicans should be talking about choice. charter schools, vouchers, anything that give minorities more opportunities. >> david? >> look, i'm in favor of the republicans being a low tax party. here's the danger. when republicans say taxes, they mean income taxes. 80% of americans now pay more in payroll taxes than they pay in income taxes. payroll taxes will go up at the
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end of the year. the payroll tax holiday will end. that's a big tax increase for everybody. 80% of americans pay more. and where is the republican plan to hold the line on those people's taxes? if taxes only mean the tax, the income tax portion of tax burden for four-fitz four fifths of the country, you're talking about something that doesn't matter that much. and in a democracy, you cannot be a successful party if you talk about things that don't matter that much to four fifths of the country. >> all right, your paycheck, your investment, your home, they may all be taxed a bit differently next year. not just income tax. that's if law makers can decide on a plan to avoid the fiscal cliff. so coming up next, i'm going to talk about a deduction that america loves, you probably love, but might be taken away. who do you think i am, quicken loans? ♪ at quicken loans, our amazingly useful mortgage calculator app allows you to quickly calculate your mortgage payment based on today's incredibly low interest rates...
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ask your doctor about once-a-day xarelto®. for more information including cost support options, call 1-888-xarelto or visit you simply cannot have it all. there aren't many things the government can cut out of the tax code to boost the revenue.
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there are a few big things that do need to be considered. one of them is the mortgage interest deduction that 40 million of you have been claiming each year. don't throw anything at the tv set. i know you like it. it is expensive. it doesn't really get the government or the housing market anything all that great. many developed countries around the world do not have such a thing and they have higher homeownership rates than the u.s. does. canada is one example. 70% homeownership in the u.s. 65% in canada. no benefit for buying a house. you have the powerful lobbyists on your side, america, protecting this thing with everything they've got. they may very well succeed in swaying lawmakers to not touch the mortgage interest rate deduction. but you need to know where it came from, who benefits from it and what it costs. so, who better to explain that to us than christine romans? she joins us now. lay this thing out for us. >> it's one of the most ex pinsive in the dense and complicated tax code. it's the middle class's most
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cherished tax break. government snding on this deduction will reach $100 billion by 2014 making it the third largest tax break on the books. but who is it really helping? it tends to benefit the upper middle class families the most. these bars behind me show income and the circles show the average savings for those with annual income up to $40,000, the average savings is a whopping $91 a year, ali. for those earning more than $250,000, their savings is much more significant about $5,500. it's not helping to boost homeownership. 65% of americans live in a home that they own. it was up nearly 70% during the housing boom. in 2005 and 2006. now we're back to the same levels in the 1980s. yes, the great recession is partly to blame. we are stuck in this 64% to 69% range. ali, housing industry lobbyists are telling lawmakers, keep your hands off this deduction. you'll hurt home prices and
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middle class. home prices will plunge immediately and home prices will fall maybe 15%. this is really important on the coasts like chicago, places where there are high home prices. compromise might be the best solution here though, ali, not cutting it out entirely. lawmakers may cap it or limit how much you can claim. there is also talk if the president gets his tax increases on the wealthiest, maybe he'll just leave the mortgage interest deduction alone. stay right where you are. good setup for this. i want to bring in kevin hasset from the american enterprise institute. he was a key romney adviser during the campaign. diane swonk is also with us, she's the chief economist from a financial company. joining us from chicago. let me start with you. the deduction is getting about $10 billion more expensive every year. but this is money in people's pockets. christine does outline that low income people don't nearly get the benefit of this that high income people do or high value homeowners do.
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but it is money in the economy. so what's the danger of pulling it out? what does it do to the economy or the housing industry? at this stage of the game the danger is very little. i wouldn't eliminate it entirely. this is a major transition. but i do think it needs to be major scaled back so that most americans can benefit from it. but we really would rather have high income americans investing in our future, investment markets and equity markets, things like that rather than in their homes. if they can build multimillion dollar homes, you don't need a million dollar deduction. on subsidizing that from the government. i don't think that's the best use of government policy. so there are a lot of arguments on both sides of the issue. but i think for the bulk of middle class americans to be able to deduct is very important. this is their single largest asset that they hold and they do trade it in and hold it for a long period of time.
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it is an asset. it is something they actually trade down into a condo once they sell it. so there is some justification for deductibility there. but let's face it, the high end doesn't need this extra deduction. it is very distortionary. we should be consuming in more productive assets. >> kevin, cutting deductions on mortgage increase will increase the amount people pay in taxes every year. it won't raise income tax rates. something that republicans are against and it will hit as christine and diane points out wealthy americans a little harder. where do republicans come down on this? >> really, the mortgage interest deduction is the worst designed part of the tax code. it is tax candy for people in paradise. it doesn't get anybody in a home. it goes to people who are going to own a home anyway it encourages them to instead of investing in the future for america have an addition to their home or something like that. i think diane is exactly right. we need to pare it way back.
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if you give a tax give away here, you have to have a higr tax rate over there. for me, i think what republicans would like to do is pare back cuts like this and use the revenue to get a lower rate. i think the right way to structure the deduction is to eliminate the deduction altogether but replace it with refundable credit. so if you're a low income person who is the true margin of owning a home, you may not have a very high tax rate. if we give you a generous tax credit, it might get you into a home. that's the way to subsidize homeownership, not to give away the deduction to people who are going to own a house anyway. >> kevin, you always bring up canada. >> we do that every time. >> right. >> new data shows that home prices are up 3.6% from this time compared to this time last year, third quarter of this year compared to the third quarter of last year. new home sales did dip a little bit. but that is less than 10% of the market. here is the concern.
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if we kill the mortgage interest rate deduction, what's the follow on effect to the housing market? that small part of the housing market is where the jobs are all created. we talked about the growth in new homes being this golden lining around the economic cloud that we're under. >> i think you need to take it in the context of the current economy. first of all, rents are so much higher than the marginal cost of homeownership even before the deductibility. that it is now encouraging people to buy homes to flip to rent for those people who can't get in or qualify on a mortgage rather than just leaving the home on the market. it triggered demand. it is cheaper even without the deductibility than renting to actually buy. that is very important. so you're eliminating some of that movement and some of that cushion on the housing market at a time it's not necessary anyway. you'll still have a lot of activity. you still have a lot of pent up demand. also, ultimately what really matters here is we need to balance our budget deficit. we need to reduce the debt in the economy to reduce interest rates. lower interest rates over the
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long haul are much more important at holding housing prices high and affordable than mortgage deductibility. i would rather have it coming through fiscal responsibility and giving it a boost to housing prices that way than rather having it coming through the distortions. >> let me ask christine this. there are other deductions i want to show viewers and their expected costs by 2014. in a year the mortgage interest is about $1 billion. property taxes $27 billion. medical expenditures a little over $16 billion. these are things -- >> forgot the 401(k), too. >> that is a huge one. all of these things, there are arguments in favor of keeping them because they do certain things. others say social engineering, right? we have the mortgage tax deduction that is supposed to get people to buy houses. as kevin points out, it's unclear whether it really does. >> the whole tax code is a whole experiment in social engineering. diane is talking about the
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distortions that the insentive makes, especially for high end housing and the like. that's what it is. it's been just 86 since we had a meaningful revamp of the tax code. it's a big, big mess. you also have lobbyists. we are having this very measured discussion about the benefits and the drawbacks of the mortgage interest deduction. there are lobbyists who are very forcefully giving a very different picture than what we're seeing here in washington. and they do and have had the ear of policymakers for a very, very long time. i wouldn't count them out. they say 15% to 20% decline in home prices immediately. that is something that most elected leaders don't want to have happen to their constituents. >> it feels bad. feels bad to take something. the housing lobby you're talking about has spent $25 million this year in telling congress don't touch this deduction or bad things will happen. diane and kevin, great to have you on the show. good to see you both. christine, thanks so much. listen, maybe we're having the wrong discussion about taxes entirely. i don't think it should be about what rate you pay as it should
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be about what return you get for the taxes you pay. do you think you are getting a good return on your taxes? i think some of you are going to say you don't. if you don't, don't ask the europeans for any sympathy. they're paying substantially more, substantially higher tax rates than you are and they're getting less for it. so are europeans getting ripped off or are you getting a bargain? think about that. can your moisturizer do that? [ female announcer ] dermatologist recommended aveeno has an oat formula, now proven to build a moisture reserve, so skin can replenish itself. that's healthy skin for life. only from aveeno. [ female announcer ] nature valley granola bars, rich dark chocolate, toasted oats. perfect combinations of nature's delicious ingredients, from nature valley. ♪ nature valley granola bars, nature at its most delicious.
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♪ trying to find a better job can likbe, so at university of phoenix we're working with a growing list of almost two thousand corporate partners - companies like microsoft, american red cross and adobe - to create options for you. not only that, we're using what we learn from these partners to shape our curriculum, so that when you find the job you want you'll be a perfect fit. let's get to work.
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okay. it's a big world out there. we need to look at all of it, lest we get a little too introspective. for that i bring in richard quest for a little q&a. richard, today we talk taxes.
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the average income tax rate, i know there are problems with averages here, but the average income tax rate for individuals in the euro zone is 42%, including countries like belgium, germany and france with some rates above 50%. in the united states, the average income tax rate is 29%. federally, 39.6% is the highest rate. someone will pay in the united states. so for today's q&a, are americans getting a bargain or are europeans getting ripped off? let me go first. 60 seconds on the clock starts right now. economies richard cost money to run. they are not free and they do not finance themselves organically. there is misplaced popularity in the libertarian myth that governments don't need to involve themselves in most economic matters and that markets will handle whatever needs to be handled. we need taxes. and we need safety and services and infrastructure in return. in some cases, it is simply more economical for governments to provide services because of scale. health care might be one
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example. the building and maintenance of smart grids and roads. broad band infrastructure. so think of taxes not as needing to be low but of the return from those taxes of needing to be high. now traditionally, richard, that worked in europe. now it doesn't. they got the math badly wrong. so what once provided a high return is now an utter failure which makes america a tax bargain. but that is going to change, too, richard. so the solution is to move to canada where taxes are low, government offerings are high. you, sir, can come and live with me and sleep on my sofa. >> and here we go. ali velshi, who ever thought this was going to be the socialism of the business world. but there we saw him in his true colors. the truth of the matter is as one famous judge in britain once said, it is every man's duty to avoid paying taxes. it is no man's duty, no man's duty to evade paying them. and that is the threshold upon which we seek. however, bearing in mind there
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are deficits that have to be covered. and there are spending that has to be reached. and in that environment, there is no other alternative but for higher taxes. do you think europeans like paying 40%, 50% taxes? but the alternative is not nearly so pleasant. i've just been to iceland, high taxes, high rate of living. and an economy that is actually recovering better than anywhere else from the financial crisis. so ali velshi, do taxes have to rise? yes, in the united states. >> i think we're agreed on this. richard, always my pleasure to see from you across the pond. richard quest. let's talk about where the taxes sometimes go. infrastructure, superstorm sandy caused overwhelming devastation and exposed dangerous flaws in u.s. infrastructure. coming up next, i'll tell you how investing in infrastructure
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will not only help get the power back on faster after the next storm but could be the key to jobs and the boom we've all been waiting for. you are watching "your money" on cnn. ♪ ♪ [ male announcer ] everyone deserves the gift of all day pain relief. this season, discover aleve. all day pain relief with just two pills. in that time there've been some good days. and some difficult ones. but, through it all, we've persevered,
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americans in the path of superstorm sandy know that investing in infrastructure will help protect against storms. as i've said investing in infrastructure is one of the best things we can could to protect ourselves from economic storms as well. american infrastructure was in poor shape even before sandy hit. the american society of civil engineers gives u.s. infrastructure a grade of d. guess what? energy infrastructure did a bit better. it got a d-plus. the u.s. is spending money on the electrical grids and power plants. $566 billion by 2020. but according to the american society of civil engineers, that falls short by more than $100 billion. so what would the u.s. get. for that $100 billion an extra $11 billion every year?
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let me tell you, the american society of civil engineers says if you spend the $11 billion this is a multiplier effect, you get an extra $55 billion in economic output. it would protect 461,000 jobs. it would generate $73 billion in disposable personal income and create in disposable personal income. michael grunwald is the author of the new deal, the hidden story of change in the obama era. in his book, he argues for increased investment in energy infrastructure. mike, welcome to the show. you say that the electrical grid is slowly actually improving. we have any of that change, would any of these changes we're talking about have had a different effect on what the people in the northeast went through as a result of hurricane
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sandy, or are we talking apples and oranges here. >> president obama had $11 billion for a smarter grid in his much maligned stimulus bill in 2009. and as a result, for instance, in the washington, d.c. area, the pepco utility was able to get just about everybody with their power back in two days, because with a smart grid, that's simply mixing up modern information technology with that ancient electrical grid we have got with smart meters and digital routers and sensors, they were able to figure out where the problems were on their grid and rout power around it, instead of trying to send out a million trucks to find out where their lines are down and find out who was without power, they were able to get things rolling within two days. >> when you're talking about the
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senator grid, one of those things is to improve the usability of the smart grid to allow for two-way communications with things like smart meters, it can heche utilities pinpoint the out an and it also means lower operational costs for utilities and one hopes for consumers, brookings investigates that -- 2009 and 2014. it is there the political will to increase investment in this sort of thing because we are used to the lights going on when we switch them on, so question don't think we need to spend a lot of money on these things. >> exactly. infrastructure is something people don't think about in their everyday lives, we just assume the lights to go on. but then in 2003, when a tree branch goes out in cleveland, and wipes out power in eight states, you realize you have got a deeper problem. the smart grid will help the
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system kind of self monitor and self heal. essentially, we have -- if you look at telecommunications where if alexander graham bell came back, he would be shocked and flabbergasted at what he saw. if thomas edison walked into a switch station, he would be right at all. to imagine all these grids with the sync meters that go around your home, you would have this situational awareness so that people know what's going on at the utility end, but also for people, in your home, you have more power over your engine use, you know which appliances aren't working, eventually your appliances will be able to talk to your utility directly and it also will allow you to use more renewable energy. if you think of the modern grid, it's sort of like those old operators who used to have to connect every call automatically, with a smart grid, you can have a more
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intermittent power when the wind stops blowing, or the sun stops shining, it transitions automatically and that's good for everyone. >> the idea that some places like new york city have all their power wires under ground, other places are susceptible to trees and things falling. former new york governor george pataki wrote that in the wake of sandy, more lerelectrical wires need to be located under ground. it sounds entirely reasonable and sensible and you say that's crazy. >> well, i mean i think it is reasonable in some areas and when a line goes down, it sometimes make sense to bury it. we have a lot of electricity lines in this country and putting them under ground, we're no longer looking at illions with a b in front of it, we're
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start torg look at trillions. these are investments that utilities need to make and are paid for by rate payers. utilities are starting to build a lot more transmission on their own and, you know, they are trying to harden their systems, but again, by smartens up, by making it so that when the wind knocks a line down, it isn't such a catastrophe, that's a lot cheapernd smarter way to start fixing our system than to try to put this entire above ground network that we have, todown, start digging brillions of hole and putting everything under ground. >> michael grunwald is the senior executive director of time. with the fiscal cliff on the horizon, people are learning a lot about the politicians they hired. maybe new buildings?
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this is the famous tax pledge we have been talking about created by grover norquist created back when reagan was president. it's not just lower tax rate that matters, it's the return that tax payers get in paying those taxes, what do they get in support, in services? washington has to do a lot to avoid the fiscal cliff


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